Fiducian double-digit earnings growth and 102 percent cash conversion ratio support 48 percent higher interim dividend

About Fiducian Group Limited

Fiducian Group Limited (Fiducian, the Group, ASX: FID), is an ASX-listed financial services business that has operated for the past 28 years. The Group’s operating divisions cover financial planning, investment funds management, superannuation, investment platform administration and information technology solutions.

Stable earnings and strong cash flow support 70 percent pay-out ratio

Double-digit earnings per share growth in 18 out of 24 years since listing and a cash conversion ratio of 102 percent of Underlying Net Profit After Tax explain the Board’s confidence in declaring the 18.2 cents fully franked interim dividend for the December half-year. This dividend is payable on 11 March and is 48 percent higher than the 12.3 cents per share dividend paid for the half-year ended 31 December 2022. The current dividend represents a pay-out ratio of 70 percent of Underlying Net Profit Ater Tax (UNPAT) and 84 percent of statutory profit. UNPAT was $8.2 million while statutory profit was $6.8 million; the difference being Amortisation expense of $1.4 million. UNPAT is considered a better measure of the Group’s financial performance because it represents cash earnings that can be re-invested in the business to grow future profits without reliance on external debt or fresh equity.

Other highlights of the December 2023 half-year result include:

• 10 percent higher revenue to $34.4 million
• Statutory profit up 23 percent, and Underlying Net Profit After Tax up 17 percent
• 9 percent lift in Funds Under Management, Advice and Administration (FUMAA) to $12.9 billion
• Pre-tax margin is 48 percent of Gross Revenue
• No debt and $21.6 million cash on hand at 31 December 2023.

All Group operating entities have in some measure contributed to the strong half-year results with Funds Management and Platform Administration services each contributing 45 percent of earnings and Financial Planning making a 10 percent contribution. Although the Financial Planning segment contribution appears small, it is an enabler of steady flows to Funds Management and Platform Administration services where inflow targets are up to $6 million annually for each Financial Adviser. There are currently 80 Financial Advisers operating from 45 offices throughout Australia.

Expenses were carefully managed, and some staff positions were not replaced immediately as they became vacant. Expenses grew by 6.6 percent which is a satisfactory outcome given industry-wide inflation and the tight labour market. Fiducian continued with the exercise of contacting a long list of non-fee-paying clients to disengage completely or renew their relationship on a fee-for-service basis.

The Future

Fiducian’s high dividend pay-out ratio signals the Board’s certitude that the Group will continue to generate consistently robust cash flow while maintaining a conservative balance sheet. Importantly, a conservative balance sheet with a healthy bank balance implies no capital raising and no equity dilution of future earnings. Furthermore, Fiducian is a highly scalable business which means that as FUMAA increases, Fiducian margins increase.

The Board have expressed confidence that the future of the business is positive and likely to continue to strengthen through organic growth and acquisition of client bases that can benefit from the Fiducian Process. This well-managed business should continue to deliver superior shareholder returns into the foreseeable future.